A ______ Loan Will Likely Have a Lower Interest Rate

question 51

Multiple Choice

A ______ loan will likely have a lower interest rate at first, but can go up or down.

• A) Subsidized
• B) Unsubsidized
• C) Fixed
• D) Variable

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Definitions:

Subjective

Subjective pertains to personal opinions, feelings, or tastes, as opposed to objective facts or universal truths.

Overconfidence Effect

A cognitive bias where an individual's subjective confidence in their judgments is greater than their objective accuracy.

Framing Effects

In prospect theory, changes in people’s decision making caused by new information that alters the context, or “frame of reference,” that they use to judge whether options are viewed as gains or losses relative to the status quo.

Mental Accounting

The tendency people have to create separate “mental boxes” (or “accounts”) in which they deal with particular financial transactions in isolation rather than dealing with them as part of an overall decision-making process that would consider how to best allocate their limited budgets across all possible options by using the utility-maximizing rule.